3 Reasons Not to Save for Your Child's College Fund

Since I had my son, I have often heard from family and friends that college is going to be extremely expensive, and it is best to start saving now. After much research I decided that I wouldn't put too much into a college fund. This may be against the usual advice of saving for the future, but here are some sane reasons why parents should not pump too much money into their children's college funds. (See also: How to Save Money for College)

1. A Large College Fund Can Lower Financial Aid

This is mostly due to how financial aid offices calculate need. Most public schools use the FAFSA, and many private schools use a combination of the CSS/PROFILE and their own formula. Regardless of the method used, generally parents and students have to list their assets, and more savings means less need. So it is actually possible for two families with equal incomes to receive different amounts of financial aid, and the family with less savings would receive more. Retirement accounts are usually excluded from these calculations, so it is to the parents' advantage to sock away more for retirement rather than a child's college fund. The calculations also usually count a student's assets fully, so if you put a college fund under your child's name, then that would hurt your financial aid numbers as well.

2. Working During College Can Be Beneficial for Students

Research from the U.S. Department of Labor (PDF) showed that young adults who had to work and pay for at least part of their college actually did better in school than those who did not have to work. This is not that surprising since the kids that had to work and study at the same time are more invested in their education and are generally more disciplined to be able to manage work and school. Those who had to work probably valued their education more than those who didn't. Additionally, these students who had work experience usually fare better after they graduate in their job searches because any job experience is better than none in the eyes of employers.

3. College Isn't the Right Choice for Everyone

There are currently many college graduates with no marketable skills who are not doing better than those who pursued an apprenticeship in a trade. If parents put away a lot of money in a college fund like a 529 plan and later find that their children no longer wanted to go to college, then they would have to take a tax penalty to take the money out for other uses. I think it is best to wait and see what a child's pursuits and talents are before deciding on that college is the best path.

My son will be college bound in about 15 years. I don't yet know what he will do, but if he decides to go to college, we will definitely support his decision. For now we are putting in $100 per month into a 529 account. In 15 years it will grow to a significant amount, but it probably will not be enough money for four years of college given the rate of increase in higher education costs. However, we're not that worried about it because ultimately I think that young adults should start taking responsibility and shoulder at least some of the costs of college. I think the whole point of raising and educating children is so that they can be independent and survive on their own, and it would be good for my child to learn that as soon as he is able.

What do you think? Are you currently saving a lot for your children's future college costs?

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Cork #1

So far we have 2 finished (debt free) with college and one currently in college. We have never saved for a "college fund". First two got through mainly with scholarships and working both on and off campus. The third one took a different route (which I highly recommend to all who can do this). He is not "academically inclined", but loves working with his hands, so chose to go to a community college for a AA in Machine Tool Technology. This is a very "hot" field right now with a demand much higher than # of students training. During his first semester, the school was approached by at least 3 companies wanting to interview students. My son interviewed and was offered a job by 2 of the 3 companies. he chose to take a full-time 2nd shift position, while continuing to go to school during the day. He receives full benefits, work clothing allowance, plus tuition reimbursement!
I know this is not for everyone, but for anyone even remotely technically inclined, this is a great way to go. Now, if he wants to pursue a Bachelors degree later, he will be able to pay for it as he goes, utilizing the training and skills he is acquiring now.
Did I mention that a Community College tuition is around $3500 or less per semester and many students can live at home while attending! Great way to go!

Yup, community college is a great route. There is actually a great shortage in trained machinsts right now. My old roommate went to her 35th high school reunion and found that a girl that went to beauty school became a salon owner and now makes millions, but a boy she knew that went to MIT is now unemployed.This shows that people make their own way regardless of college and an useful trade is often more in need than a general college education.

Guest #3

I disagree with a lot of what it said here.

If the 529 college fund is placed in the grandparents name, it won't be seen by the college financial aid office. About working during college, it depends on the major. I had a degree in engineering and I took extra classes on communication and statistics. There was no way I could work during college. My parents saved up, I had no loans, and I was making good money from the day I graduated (it is now 15 years later, I also have a PhD, and I'm making even better money).

College may not be right for everyone, but if you save up, at least you have the option. 529 funded can be redirected to another beneficiary.

Not everyone is going to have parents that actually set up an account for grandkids. It is possible to shield that money, but what is to prevent the grandparents to withdraw the 529 money that you put in for your kids? It just makes it more complicated if you do it that way.

I am like you and my parents paid for my college and I had an engineering degree, but if I did have a loan I would've been able to pay it off pretty quickly because I got a good job after college. So basically what I'm saying is that if your kid is able to make money later it's better to just let them go out and do it themselves.

Mike Dayoub, CFP® #5

You said "If the 529 college fund is placed in the grandparents name, it won't be seen by the college financial aid office."

No longer true. Unfortunately the value of that loophole disappeared in 2009. http://www.finaid.org/savings/loophole.phtml Income from the 529 held by the grandparents would count as "untaxed income" to the student and the 2nd year's financial aid would drop precipitously. That is because income to the student counts much higher than assets in a 529 held by parents, when calculating how much the family can pay (EFC).

Valerie #6

Interesting points. I go back and forth on how much to invest in my childrens' college funds.

Definitely agree that retirement savings are a higher priority. However, do some research on how much the FAFSA counts your savings account before deciding. I've seen that only 5% of parents' non-retirement savings accounts are considered, while its more like 20 - 25% of the student's savings accounts.

Please take this article down. It's going to give families some really terrible advice. 529 plans will have minimal if any effect on aid. Working during college is great but the few thousand dollars even the most ambitious students van save will rarely cover a class or two.

My parents paid for my college but I did take off a semester to work at an internship full time. I also worked on campus and I saved over $20,000 from working during college. It is a more productive use of time.

Guest #10

I agree that this should be taken down. This is terrible advice and borderline negligent. You should fully educate yourself on the financial aid calculation process before giving out such advice as a so called "expert" financial planner.

I have read about the financial aid process, and I'm not a financial planner. I don't know where you got that idea. I'm just writing about why I think I shouldn't dump too much into a college fund. Obviously everyone's situation is different.

Your point about the difference between same-income families with various levels of savings qualifying for different levels of financial aid is a good one. Plus your mention that retirement savings plays a different role than 529 savings in these calculations is also worth paying attention to.

Many experts do advise people to save for retirement rather than college for kids but generally b/c of the rationale that you just need to save for retirement and you can let your kids pay off their student loans in their working years. But saving for retirement and specifically, putting dollars in retirement funds can be advantageous in terms of financial aid. Many years ago, my husband and I took a distribution destined for retirement but not designated as a retirement fund; this sharply reduces eligibility for student aid now. The FAFSA calculations have changed since we started saving (as have tax laws) so that made it difficult to plan. Still, people should consider how money is classified in order to qualify for aid.

As far as work, there do seem to be more opportunities for kids to work on campus than I remember (having just attended my oldest's college orientation) but some of those positions are slotted for those who qualified for work-study forms of aid.

Yup, those work-study type of aid also is calculated due to FAFSA/CSS PROFILE so it's better to have your money in your retirement accounts and give your kid an edge in qualifying for those jobs. I found that getting jobs in college really helped me learn how to work in a professional environment and collaborate with people. It was also easy for me to get a job later on.

Taking financial aid into account is a good idea when thinking about saving for college. Not all grants and loans are given according to the income of the parents, although most are. You will get significantly less amounts than those who did not save, but what if the savings out weight the loans? Also, it is VERY true that those who are forced to work and go to school do better. Not only are they more invested in their education and grades, but realizing that they are paying for classes and time spend in school, is a much greater incentive than to those who have their parents pay for it all. It also forces students to be less lazy with their time - if they only have a certain amount of time to get school work done while also balancing a job, they will be less likely to sit around and watch TV or browse the internet. At least this is true in my experience.

This is poor advice for middle income families. Not saving for college will leave you in a position to need to borrow significantly for college. Your income is by far the biggest factor used by schools to determine your ability to pay. FAFSA only uses 5.13% of your savings to determine you Expected Family Contribution. When you do the calculation, you will be surprised at how low of an income puts you out of reach of a lot of aid.

Middle income families are most at risk with your strategy. They probably earn too much for financial aid but will not have saved anything under your recommendation. High income families can pay out of their current income and low income families will qualify for aid.

I didn't say that middle income families shouldn't save at all, but given a choice between retirement savings and college savings for your kids I think it's probably better to save for retirement. Kids can figure out paying for college later on on their own since they have many more years of future earnings.

There's quite a bit of great discussion on that article, too. 5.13% of savings is a lot of money if you save 100k to 200k for a child's college. A college would knock off 5 to 10k on your aid at that amount of savings. If your child were able to get that aid and work a bit more for the rest it might not be so bad. Additionally if you do put that money in a retirement fund, and you really want to help your kid pay off college later on you can still take the money out of your retirement fund and help them finish off the loans. You can start withdrawing from IRAs and 401ks penalty free at age 59.5 and for roth IRAs you can take the contributions out penalty free any time. Maybe I should've clarified that a bit more in my article.

benzaiten #19

@ GF: As someone from a middle income family I respectfully disagree. I paid my way through undergraduate by working part time, weekends and nights. I unlike my peers saved up by myself; I did not feel any sense of entitlement from my parents. I refused to buy newest tech toys. I deferred buying a car and I took public transit. I lived at home as long as I could to reduce expenses. Obtaining an Ivy League education was not a concern. So, if my child wants it, frankly it will depend on their abilities. They will need to EARN IT. I researched and applied for and obtained many scholarships, grants, and even assumed debt for my education.
I attended a community college immediately (one week) after graduated from high school. At the same time I applied to State Universities and UCs (Berkeley, Davis, LA) and got accepted to all. I transferred as an advantaged standing student primarily because I had a plan and proactively researched and coordinated with admission counselors. Achieving all of this absolutely was not easy but it definitely taught me invaluable life lessons. E.g. Personal finances, discipline, time management, using public resources, research, deferred gratification, living below my means, cooking, and even how lose my ego and ask parents & counselors for advice.
Now as a career minded adult ready to start a family, I will encourage my children to work and save up too. As someone who did not rely on FAFSA I will tell it you financing a college education on your own can be done. The main difference using my approach is it places FULL financial responsibility squarely on the shoulders of the student and not on the parents. I did incur some school debts but I have long since paid it off in full. I rather owe education debt instead of transferring it to my aging parents. Simply put I view higher education as a choice. MY choice.
Now, can people finance their retirement? NO! We can finance almost everything else in life from birth, surgeries, houses, cars, vacations, and even funerals. But you cannot finance your retirement, can you? And until the day that is possible, I firmly believe the ONUS of financing a college education rests on the student. College as many have commented already is not appropriate for everyone. And, even if you really want your child to attend, there is no guarantee they will apply themselves and appreciate your generous gift to partly or full finance it. As such, doesn't it make sense for all students to take responsibility and create a "vested interest" by assuming some if not all of the financing?

Thank you. Maybe I'll write about why I don't think it's the parents' responsibility to pay for college next. Like you, I think that college is a choice that needs to be made by the child and not the parent. They need to earn it.

Guest #21

Your points are valid and I agree that families shouldn't put too much in their childs college accounts, but I think you should look at the current issues that center around student loans. If government financial aid was stable and there wasn't a massive amount of student loan debt looming above everyone, it would make sense to point out things like FAFSA and other loans. But I personally think that won't be reliable pretty soon. Even people who are responsibly taking out loan will hurt when the government hands out less student loans and increases interest on the current ones. Isn't it better to have money to spend rather than taking out a loan in an unstable market? source: I'm in my 2nd year of college. Parents help significantly and we saved about 10k before I started attending. We are fortunate in that we don't have to take out many loans, I have only about 5k in my name.

Well not all financial aid comes from the government. Many private schools offer their own financial aid from their own endowment. Public schools are funded by tax payers but still offer merit scholarships and work study programs. If there is a will there is a way. Like a previous commenter said, retirement is something you can't really take out a loan for. If parents do not save enough for retirement and instead spent the money on their kid's college expenses then it is not certain that their kids will actually take care of them when they are old. I am coming from the point of view of a parent who wants my child to be independent, but also I want to be independent from my child when I'm older.

Jeff #23

Xin, you will not be independent from your child when you are older. By not saving for his education, he will be undoubtedly be in significant debt and therefore, will be living with you until he is 35.

@Jeff: there are many other ways to fund college besides debt. Additionally, there is no way I'd let him live with me past 18. Anyway, my parents didn't save for my college either. I just chose to go to public university that was already affordable for them. If you really think that borrowing 200k for college is the only way to do it then you haven't looked hard enough at the alternatives.

Jeff #25

When you and I went to college vs. when our children will go to college can't be compared. As you know, college costs are far outpacing cost of living. While our parents may have been able to get away with not saving for us, we will not have that luxury.

Guest #26

I can only say that i am glad that put a lot of money into 529 making sure that my son will get a BA , MS or a phd free of debt. When i decided to become a mother higher education is a part of my plan.

It is puzzle me to see people who put as little as possible into the 529plan but they spend fortune on luxury goods and vacations.

I am with Xin that saving for college under the child’s name, even in a 529, is not a good idea. However, I still plan to save for my daughter’s education. But my approach is unconventional.

1. Open 529. All birthday & gift money (since I am Chinese, my daughter get small amounts throughout the year) goes into this account. We are also contributing a small amount to this fund each year.

2. Open a Roth IRA. The money in this account could be use for college before retirement age since it is penalty free if we take out only the principal. The flexibility of this account also allows us to keep it for retirement or to help the child start out in life.

3. Pay off our mortgage. If we pay off our mortgage by the time my daughter goes to college, we can channel the mortgage payment to a college payment.

4. Fully fund our retirement accounts. Most middle class families feel the squeeze when the college bills hits. However, if our retirement accounts are fully funded when we are young, we could reduce our retirement savings.

My expectation is that between the 529, Roth IRA, the money from the mortgage payment, and my child working a few hours a week, we can pay for her college education at a public university. I worked all through college and have a degree in engineering. I expect my child to work even if she decides in a major in the sciences.

By the way, if my child decides to go to college for a degree that is not marketable in the workplace (ie. Art history), we don’t plan to financially support that decision. I’ve seen too many friends flounder after graduation and have no idea what to do with their lives. If my daughter has no idea what she wants to do, then she can go to a community college for a while to figure it.

That's great. Also if you pay off your mortgage your countable assets will be lower for financial aid, too. They usually don't count your primary home towards the assets. I think that a lot of public universities give you the most bang for the buck for undergraduate studies, too.

Edward #29

Two words and an emoticon: Oh, man. :(

Saying you shouldn't save for college because it isn't for everyone is along the same logic lines as not saving for retirement because you might not live that long anyway.

I'm so glad and eternally grateful that my parents paid my tuition through diligent saving in a fund. And (as far as I know) those who had to work through it didn't get better jobs than I did. After college though, I was cut loose to make my own way.

I really wonder if some day you'll end up in a retirement home, need help with something, and your kids look at you and say, "Ah, she'll be fine! It'll be good for her to try and do it herself."

I say that college isn't for everyone because the fact is that only around 30% of people 25 and over in the US have a college degree. source: http://www.nytimes.com/2012/02/24/education/census-finds-bachelors-degre... This means 70% or a majority of people didn't go to or finish college. You can't possibly say that 70% of people don't make it to retirement. If I were in a retirement home then I'm probably going to be paying someone to do stuff for me. That means I would need a significant retirement fund. Very few adult children will take on the responsibility of full time care for their parents, and I wouldn't want my child to pay for it either.

Jeff #31

Only 30% of people have a college degree because their parents didn't have means to save for their education. I would guess that many of these readers do have the means, and therefore should be saving. Also, to your point about most children not caring for their parents, I have a stat for you. 73% of people with a chronic illness over the age of 65 receive care at home and that care is provided by a family member, often times their children (U.S. Department of Health and Human Services: National Clearinghouse for Long-Term Care Information, 2010).

MelodyO #32

I have seven words for you: The world does not owe you anything.

The crushing sense of entitlement so many young people have is unbelievable. You want a college education? YOU figure it out. Parents have to love you, feed you, and put a roof over your head. Everything above and beyond that is a GIFT, not a payment for services rendered.

And to say that 70% of people don't have degrees because their parents wouldn't cough up the tuition is ludicrous. Even pretending that's true (and I am *really* pretending), that would say more about the helpless young adults who curl into a ball at the first sign of adversity than the parents who wouldn't or couldn't foot the bill.

Jeff #33

529 plans are the best thing to come around for parents looking to save for college education. If they were around when we were growing up, our parents probably would've been contributing. In most of the responses I've read to other commenters, you say "save for retirement before college". I agree with that approach, as you can't take out a loan for retirement, but the more prudent advice would be to do both.

Obviously everyone has different income levels, but most likely, your highest earning years will be when your kids are already in college or already out of college. Catch-up provisions on IRAs and 401(k)s allow you to invest more later in life to "catch up" on retirement savings. I, for one, would rather do that then have to watch my kids saddled with $200k of student loan debt that will hang over them until their 30s. Your $100/month contribution will not cover half of a semester in 15 years. It's great that you want to teach your child a life lesson in working hard and earning your keep, but you could be starting him off in a very difficult position right out of college.

I'm all for a parent's retirement being a higher priority than the kid's college fund (up to a reasonable point). But to not put money in some kind of savings account that is earmarked for college just to improve the chances of qualifying for financial aid is "gaming the system" and, in my mind, is unethical. This is not unlike giving all your money away just to qualify for Medicaid.

The tax penalty mentioned in the unused funds only applies to the profits, not the original savings principal. The only thing I agree with is that retirement and emergency savings should take priority over a 529 account.

As someone who makes a profession working with students who are preparing to go to college or who are already in college, I can say that #1 and #2 are ridiculous statements. *However,* I strongly support #3. There are way too many students going to a university underprepared and who really have no business being there. Having a higher education is not the answer, having skills, experience, AND education is the answer. Unfortunately, too many students put all their eggs in one basket - a basket they're not good at holding.

There were some valid points on here, but the approach of the article could have been improved. I've seen a lot of articles about the types and tricks on how to get the most out of financial aid and I don't like the idea of trying to game a system so I can get more money from taxpayers and government debt. If you are in a position to help your children pay for college it can give them a huge leg up. If you aren't don't cost your own retirement to save for your children's college education, but to present it like it is in this article isn't very responsible to the general public.

As someone who just graduated with two bachelor's degrees while working full-time and receiving zero contribution from my parents I would have to say the trend of stating that kids need to start "taking responsibility" for their education by paying their own way is often repeated by those in a generation who had their education heavily subsidized by tax payers. My tuition increased $4,000.00 from freshman year until I graduated (this does not include fee increases that cost an additional $1000.00 per year).

My parents had nothing socked away for my education, and due to debts were unable to help me. Their incomes were still high enough for me to not qualify for a Pell grant or additional need-based grants, or really any grants at all (especially when you included my full-time wages which are required to be reported in the FAFSA). I left school until I was over the age of 24 (the magical age where the federal government decides that you are financially independent...the only other exceptions to that rule are if you were a ward of the state, emancipated, or married) because my financial aid was so bad that it was impossible to pay tuition and living expenses with my meager wages (remember I didn't have a college diploma yet and was lucky to make more than $10.00/hour), even with heavy use of student loans.

I went to a state university (one of the least expensive large universities in the country) and even turned down going to a better school because I could not afford it. At the end I owe about $40,000.00 in student loans.

A part-time job to help pay for books and extra school expenses is one thing to promote responsibility, but I urge people not to screw your own children over if you are able to afford to save for college. Afraid your child may not go to college, then don't invest in 529 plans. There are multiple mutual funds that would do just as well or better which would allow you to access that money when your child is of age or sooner if necessary. If they don't go then you have a very large savings which you can begin transferring to retirement savings.

The idea that saving now will make financial aid worse later is like saying don't make more than X a month or you won't get your food stamps anymore. Why allow yourself to be in the situation where you are at the mercy of the financial aid office at your child's school? You have no idea what your income or finances will look like later (even if you take great pains to plan and save), or how much more expensive a college (or technical school) education will be. You also don't know how you will stack up against other parents when financial aid is being awarded (every school determines what a "needy" student is).

#4. Wait my son didn't start college until he was 24 at that point the parents income is no longer counted in FASFA. Along with a part time job and getting the core courses in junior college the only cost have been a couple of summer semisters. He is starting his senior year this fall debt free.

Isn't it hypocritical to say "maybe you shouldn't save for your child's college education" when in fact you are? I know it isn't as catchy, but maybe the title of this article should have been "Why You Shouldn't Save 100% of Your Child's Education Fund".

Furthermore, the "tax penalty" on the 529 plans that you indicated in your article is a bit misleading.

All taxes and penalties incurred are on earnings only, not on principal. Since the money has been sitting there earning interest TAX FREE for the whole time it's in the account, of course you'll have to pay taxes on it when you take it out. The bonus "tax" for unqualified withdrawals is 10%, on earnings only. That's really not that much.

Example: You put $100 per month into a 529 plan for your son for 15 years. That's $18,000 of contributions.
Earnings based on
3% interest - 4988.26
4% interest - 6989.44
5% interest - 9188.99

Since you would have paid the taxes on this money at the time you had earned it if you hadn't put it in the 529, I'm not including it here - it's a wash (unless you've moved into a higher tax bracket). So the "cost" of putting the money into the 529 is the 10% penalty:

Whether that "cost" is a risk you want to take on your own child is a decision only you can make. I consider that a pretty good bet in my case, and well worth the potential loss.

I also consider my college education one of the best gifts that my family could have given me. Finishing not only undergraduate but also graduate school with almost no debt allowed me to follow my dreams and not just a paycheck. And passing on that gift is something that I'm happy to provide to my daughter. Financial aid is not guaranteed, and financial aid rules can change, so I don't think it can be counted on. The only way to know that the funds will be there for my daughter's education is to save for them myself.

So we live simply, max our our own retirements AND save for our daughter's education. Anyone who managed to save $20,000 while in college could probably do the same.

Some family friends told me how they funded their child's college education...

They saved money for a down payment on a home. As their child got closer to choosing a university, they investigated homes near the universities that they would buy and rent out. Once the kid decided on a location, they offered him the option - they'd pay his room and boarding expense if he lived in their house and acted as the "land lord" for other students. Son would pay tuition and costs.

In the end, their son paid no room and board - as the other students ultimately paid for the mortgage and the son's food with their rent.

After he graduated, the plan was to sell the home to pay off the rest of the tuition bill with the equity. Either way, the son owned the tuition bill and the parents paid their part by providing room and board at little to no cost (as they expected to make their down payment back).

The point is that they saved a lot less than 100k to make it possible.

I wish I would have known about this approach as my step-son was in grade-school and high school. It would have been better than what we ended up with - a student who could only qualify for loans to cover tuition, meaning that mom had to take a parent loan for the room and board.

The only way I would partially agree with this article is if the parents were truly strapped for cash and tring to pay down debt with a debt snowball and/or not able to save enough for retirement. Parents should put their retirement first but once you are savings enough their college saving should be a priority for most situations. I just can't agree with any plan that is depending solely on student loans or scholarships. No guarantee of scholoarships and true financial aid grants not loans are extremely rare and only for those parents and students with very low incomes and net-worth. The attitude of "I'm not going to save for my own kids college because it might effect my ability to get government handouts and let other tax payers pay for my child to go to college" is irresponsible and just plain wrong. This is why our country is buried in national debit. This lack of proper planning, personal responsibility, and sacrifice. We should all do everything we possibly can to avoid having to take government handouts and/or handicap and burden our kids with huge debt she they are just coming out of school and starting their adult lives. The amount of Student loan debt is this country has now passed credit card debt and is the next great bubble. Politicians and student loan debtors are already lobbying for bailouts of debtors. Who pays for it? The government. Nope. The government doesn't have any income. It's the tax payers. It's your neighbors who may not even have kids or who sacrificed and saved enough to pay for their kids college but now they have to pay for your kids too. Of course there are genuinely families who need college grants and needs based scholarships, but there is no excuse for parents who like you who are planning ahead to game the system and let other tax payers pay for your kids to go to college. People think the money grows on trees. It doesn't.

Here's a few problems and notes I have for each of the 3 points in this article.

1) Not all financial aid is need-based. A lot of scholarships are merit-based, which will not take (or shouldn't take) into consideration your finances. Ergo, regardless of how much you save for college, your children should be on a level playing field with merit-based scholarships. Also, regardless of your finances, every kid has equal access to Stafford student loans. It doesn't matter whether you make $50,000 a year or $500,000...everyone can get student loans. I think any article talking about financial aid should have mentioned this.

2) Thank you! It's about time that some parents realize giving their kid a free ride is a great way to keep hammering home the idea that they should get everything handed to them on a silver platter and nothing should be earned. Every single kid who goes to college should have to work part-time and have some skin in the game. It also reduces the chance they'll get a really useless major that no employer has any interest in.

3) You're leaving out information here too on savings plans such as 529 plans. 529 plans are not just for college...they're for any qualified educational expenses. As far as I'm aware, as long as the school is accredited, withdrawals from a 529 plan can be used to pay for the program. This includes a lot of trade programs such as auto mechanic, welder, etc. that you can do through a community college. Again, I think the reader should be given full disclosure on these topics so that they have all the facts.

I'm not necessarily sure I agree with all the comments that it's negligent to provide such advice. You're still putting away some money for a 529 plan, as everyone with kids should, but I think more information on financial aid and 529 plans would have gone a long way to making this a more fulfilling article.

As a very recent college graduate I think that this isn't very good advice to give parents. The number one reason for parents not to save money can be shot down by the fact that the whole point of them saving is so their child won't NEED financial aid. That's the first thing that stuck out to me. It's like, if you save enough for your kids to go to college you don't need to worry about financial aid, you don't need to worry about financial aid you shouldn't worry about how much you save. Not to mention that financial aid for the major of use college students and recent college grads is just another word for loans and if you do that math, taking out loans will definitely cost you more in the long run, in the way of money via interest, and freedom via monthly payments.

Also, I myself, worked three out of the four years- at one point having two jobs and maintaining a full load, which I don't recommend- and I made no where near enough to pay my own way. I was just doing good to handle additional expenses (books, gas, groceries, etc). My parents wished with all their hearts that they could have helped me out and even though they wanted to, they had financial troubles of their own. Even if they could have contributed to half to my college education I would be so much better off than I am now. I would have still taken up a job and if I wasn't so worried about my financial situation all the time I would have taken up more extracurricular activities. I actually had to give up rejoining a club that I absolutely LOVED, cause I had to take up a second job to pay toward my last semester in college.

I made a lot of mistakes as far as my decides about college, but I also wish that my parents were there financial to support me even just a little. There is no harm in saving money and it doesn't necessarily have to go in a college fund. I say that parents, save for your kids education like you save for everything else and if junior doesn't go to college then -hey!- more for that retirement plan. Saving money when you didn't need to is so so so much better than not saving when you wish you had.

Everyone's situation is different and college isn't for everyone, but statistically your child's potential is limited by not achieving at least a 4 year college degree. And, they are going to be a lot better off if they get out of college with a minimum amount of debt. To that end, I’d encourage you to look at a product our company just released called CollegeRegistry. It is an innovative crowd-funding solution that allows friends and family to help you reach your college saving goals. Check it out at collegeregistry.fipath.com- it’s free, easy to use, and every little bit helps.

I'm sorry but choosing to not save for your child's college fund when you have the means to is WRONG.

I am 23 years old, and I graduated from college last year with $80,000 in loan debt. I got my first repayment bill the day of graduation, turning what was supposed to be a happy day into a day of panic because I had no job lined up.

My parents were very honest and admitted that they did not save anything for me for college, but I foolishly believed I could pay my own way through loans, scholarships and working all four years. I did work, about 20-25 hours a week every semester (That was as much as I could fit in), and I took extra time to freelance to make more money. But doing so caused me to miss out on some very valuable experiences, with friends, with campus events, and especially internships. I did manage to do one internship (while I was working the same semester... I barely slept), but my grades suffered at the same time. Furthermore, the place I interned for shut down the following semester, leaving me with no future prospects of a job there. Internships are generally unpaid these days, yet they are necessary. I turned down one at Cosmopolitan Magazine because I simply couldn't afford the transportation costs and the time it would take each week, and I have never regretted anything more. Yet the fact is, I simply couldn't afford it.

Now, as for scholarships and financial aid, the competition is fierce-- much worse than you can possibly imagine. I applied for over 2,500 scholarships and only got one, one that gave me only $1,000. I didn't get much financial aid from my school because I am just your average, middle class white person, even though I had no money for college and I had two siblings in school at the same time (I'm a triplet). Your reasoning that "Oh, they'll get more financial aid if I don't save money for them" is just foolish and irresponsible. Furthermore, if your child did get financial aid for this reason alone, it would take money away from someone who truly needed it-- someone whose parents really couldn't save up any money, not but choice.

I am currently unemployed almost a year after graduation, well, underemployed (I freelance and work in retail just to make my loan payments). I desperately want to leave home and start my life, but because I owe around $900 every month in loans, I just can't afford it (so it's pretty ironic that you say not paying for your child's education will make them independent!) Yes, it is extremely frustrating, and quite frankly I am miserable.

Sure, they economy may be better by the time your child graduates from college, but in the meantime, shame on you for writing this article.

I saved and worked my way through public university. My parents provided my clothing and other incidentals and I had a small job on campus. Otherwise I worked many shifts during the summer. I plan on saving what I can for my two children for college, but I also plan to have them work. Back when I went to college jobs were abundant. That is not the case nowadays so community college is really where I will be steering my children. They can start there and then launch into a 4 year institution with credits to their name. The government is heaviliy investing in community college curriculum. An AA or AS degree under your belt can more than likely get you a job and then you can work for the BS or BA. The work experience will also assist you in choosing what major you find fits you the best. The key to now is diversify, diversify outside of the 4 year institutions.

John Heenehan #51

If you're older parents, as my wife and I are, there's another reason. I started to save for my two kids' college about 10 years ago and promptly stopped when I realized I will be in or near retirement -- and can tap my IRA instead when they're graduating high school. Thus, we're not reducing their financial aid opportunity, as the author notes.

Our two college funds have grown by about 50% over this past decade, while our IRAs, despite the market collapse a few years ago, are up 200%. This was a slam dunk. And the girls are smart, too!

We just brought our daughter up to University of Central Florida. It is very expensive and she qualified for 75% Bright Futures which means 75% of her tuition is paid. This can be as high as 100% but depends on grades and test scores in high school. Her tuition is about 1/2 of the per hour fee so we pick up a lot on top of that. We have saved some for her education but about $30k which won't go far. Our plan is to try and pay as she goes and leave that money for when she graduates. We are also having her apply for many scholarships as well. She has worked for several years already so this might be an option her 3-4 years. We would like her to be debt free when she is done as well. Our income is such as we will receive no aid and she might not either but not ruling out.

Our son has been going to a local state college for 3 years and will be transferring up to UCF this spring. They each have a journey that is their own and we have been paying for his as well although not as much. Both kids have worked and are not afraid to work. They are aware of the costs of things and make them own their decisions.

We didn't enroll in formal college savings accounts for our kids because when the kids were young there was a strong chance we would be overseas for those years.

Fortunately, the kids are in college with scholarships and savings. We pick up the difference, books, parking, car maintenance, gas, phones, rent etc. We are half way through and everyone is still debt free. It's not easy, but well worth it.

We won't be saving for our children, but not because we don't intend to help them. (And I mean help, not pay for it all, because we want them to work part-time and value the experience.)

We plan to pay off our mortgage now, which will allow us to finally properly save for retirement. Our incomes are not high, and we save only a small amount now. Our mortgage payment is what we should be saving for retirement.

With a small additional savings after funding the IRAs, we hope to save enough to return to real estate (we used to own rental property) when we are able to purchase a property in cash (maybe in 5-6 years). Obviously, it would have to be a cheap property! But we would either rent it or resell (this would require the RIGHT deal, but it can happen). With additional money from this adding to our cash flow, we plan to contribute to our kids' education.

We have 10 years before the first will go to college, so I think this is doable.

We won't have any savings to count against financial aid, but we will have set up our retirement (which we haven't been able to do, since we had our own student loans). But we will have cash flow.

Also, my life was hard as I worked throughout college. But my grades were outstanding. My education mattered--I paid for it!

Still, I don't want it to be so hard for my kids that they are harmed. So I plan to contribute at least a third, DEPENDENT ON THEIR GRADES.

My sisters and I all paid our way through college by working, financial aid and our own savings. But despite all of that, we all struggled to come up with all the money needed each semester. At one point we asked our parents if they could help us a little -- maybe $500 -- and they got mad at us for asking. We were good kids with good grades. That experience has caused me to save money for my daughter's education -- but I will encourage her to work while in school because it will definitely help her get a job after college.

Guest #56

I resent this article. This is why more PhDs are international.

All of my international friends have firm parental support. I used to date a dental student. I went around the table one dinner and asked about 20% of her class what their parents did. All of their parents were very well off and well educated. I do not believe for a second that the students were not seeing any of that money.

If you don't lead by setting a good example, expect your children to follow you.

Keep in mind that with most 529 plans, if the beneficiary decides not to go to school, other members of the family can use the money without penalty for educational purposes. You may not have thought of going back to school, but it could beat paying penalties.